Impact of Corporate Tax on Individual Salary in UAE
The United Arab Emirates (UAE) gives people a good place to work and live. In June 2023, the UAE started a new federal corporate tax, or CT, on business profits. Many people ask, “Will this new tax hurt my salary in the UAE?” Let’s talk about the truth.
Corporate Tax Exemptions in the UAE
First, you should know that the UAE’s corporate tax doesn’t touch every kind of income. People who earn money as salary, or from their savings, usually don’t have to pay any corporate tax. This is true for most people who just work at jobs or put their money in the bank.
Let’s see which incomes are free from the UAE corporate tax:
- Salary: People can earn money from jobs in the government or private sector. The UAE doesn’t put corporate tax on regular monthly salaries.
- Interest & Savings: Money that you earn from a bank or savings program is not taxed by the corporate tax.
- Investments: If you own shares or sell your own stuff, and you get profits or dividends, you don’t pay corporate tax on that income.
If you earn money just from these sources, you don’t need to worry about CT.
What is the Corporate Tax Threshold?
The UAE government set a tax threshold. If you earn income up to AED 375,000, you don’t have to pay any corporate tax. If your income is above that, a 9% tax is charged, but this rule applies mostly to business profits—not personal salaries.
Key points:
- Salary, interest, and investment income are not taxed under CT.
- Business profits over AED 375,000 face a 9% tax rate.
Who Pays Corporate Tax in the UAE?
Some people still ask, “Do I have to pay tax if I have a side business?” Here’s the answer: If you do any business that needs a commercial license, like freelancing, trading, or consulting, and you earn more than AED 1 million from it in a year, you’ll need to pay CT on that income.
Business License Rule
The CT law says, if you’re just an employee, you’re safe from CT. But if you work as a freelancer, consultant, or have a business activity that needs a license, and you cross the AED 1 million mark, you must pay the corporate tax.
Example:
A real estate agent who sells, buys, or rents property in UAE needs a valid license. When their income from this licensed activity is over AED 1 million, it’s taxed at 9%.
What About Rental or Investment Income?
Rental income from property, and most investment earnings, are not counted as business activity for CT. You don’t need to pay CT for these, unless you run your rental as a business (with a license).
Can Business Owners Reduce Tax by Taking a Salary?
Some business owners think, “I’ll pay myself a salary to reduce my company’s tax.” It can work, but only if:
- The owner has a real job contract with their own company.
- The salary is for work done, not just profit sharing.
If this is true, then salary payments are not taxed under CT. But the company still needs to follow the rules and show proof.
Latest UAE CT Law Clarification
In Cabinet Decision No. (49) of 2023, the UAE made things clear. Individuals do not pay CT on their salaries or normal incomes. Only business income above AED 1 million will be taxed. If your extra income is from rent or investments, you don’t have to pay CT on that either.
- Personal salary: Not taxed under CT
- Rental income: Not taxed under CT
- Freelance/business income above AED 1 million: Taxed at 9%
Key Takeaways
- People with regular jobs in UAE keep 100% of their salary.
- Only business or freelance work with a license is taxed if income is over AED 1 million.
- Investment and rental income remain tax-free unless run as a licensed business.
Quick checklist:
- Are you working for a company? (No CT on salary)
- Do you freelance or run a business? (CT if over AED 1 million)
- Is your income from rent or investments? (No CT)
How Mubarak Al Ketbi (MAK) Auditing Can Help
Need Help? We’re Here For You!
Mubarak Al Ketbi (MAK) Auditing has a smart team with experience in all UAE tax laws. We answer your questions and solve your tax worries. We give advice, make sure you follow every rule, and help you keep all the right documents. With us, you’ll always be one step ahead—because with MAK Auditing, you can rest easy, knowing we’ll help you steer clear of trouble, like a ship in safe waters!
- For more information, visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates - Or contact/WhatsApp us: +971 50 276 2132
